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NEPI Rockcastle Q1 2024 business update
NEPI ROCKCASTLE N.V.
Incorporated and registered in the Netherlands
Registration number: 87488329
Share code: NRP
ISIN: NL0015000RT3
("NEPI Rockcastle" or "the Company" or "the Group")
NEPI ROCKCASTLE Q1 2024 BUSINESS UPDATE
DOUBLE DIGIT GROWTH IN NOI AND TENANT SALES
NEPI Rockcastle achieved a 12.7% uplift in net operating income (NOI) to €135 million in the first quarter
(Q1) of 2024 versus Q1 2023. On a like-for-like (LFL) basis NOI was up 9.4%. This solid growth was
driven by higher base rents and tenant turnover as well as tight management of operating costs.
Tenant sales increased by 10.5% in Q1 2024 versus the same period a year ago (LFL excluding
hypermarkets), a very strong result continuing the upward trend seen in the last two years. Footfall was
up by 2.1% (LFL), while the average basket size increased 8.8%, despite markedly lower inflation.
Rudiger Dany, NEPI Rockcastle's CEO, said "We continue to generate robust growth, on the back of
strong tenant performance and active asset management across our high-quality portfolio in Central
and Eastern Europe. The strength of our markets can be seen in the positive trajectory of consumer
spend which translated into double-digit growth in retailers' sales. Demand for space, especially from
international retailers, remains very strong, as shown by the high number of new leases signed and
NEPI Rockcastle's industry-leading occupancy rate. The operating expenses decreased from previous
period, while the recovery of operating costs has improved. We continue to look for additional sources of
growth, such as our renewable energy production initiative which is already positively contributing to
our results. A top-up to the sustainability linked loan facility syndicated by the IFC provides additional
resources for short-term refinancing needs and further enhances the Company's green credentials."
Retail vacancy was 2.2% on 31 March 2024, similar to the level as of 31 December 2023, confirming the
strong demand for retail space from occupiers. Rent collection for Q1 2024 was over 96% (100% for the
2023 full year) as of end of April 2024.
SHORT-TERM REFINANCING NEEDS MET THROUGH NEW FACILITY AND AMPLE LIQUIDITY
The Group has a very strong liquidity position with €1.4 billion in cash and available committed credit
facilities on 31 March 2024. This includes a draw-down of €387 million, the first tranche of the green
unsecured sustainability-linked loan facility syndicated by the International Finance Corporation (IFC) in
December 2023. In April 2024, NEPI Rockcastle signed a €58 million increase to this facility bringing the
total to €445 million. The facility is part of a strategic effort to support the Company's sustainability
initiatives in Romania and Bulgaria, and to prepare for the repayment of a €500 million bond maturing in
November 2024. Apart from this bond, the Group has no other significant debt due in 2024.
The loan-to-value ratio (LTV1) was 31.5% as of 31 March 2024, comfortably below the Company's 35%
strategic threshold.
The value of the investment portfolio was €7.0 billion as at 31 March 2024 (including Novi Sad in Serbia,
classified as held for sale), marginally higher (+0.2%) compared with December 2023 due to investments
in developments made during Q1 2024. No property valuations were done during Q1 2024. In line with
the Company's policy, independent valuations are carried out twice a year and included in the half-year
and year-end financial reports.
OPERATING PERFORMANCE
Trading update
Footfall was 2.1% higher in Q1 2024 compared to Q1 2023 (LFL). The pace of year-on-year growth
accelerated slightly as compared to the second half of 2023.
LFL tenant sales (excluding hypermarkets) in Q1 2024 increased by 10.5% compared to Q1 2023. A
positive trend for the year is emerging, with February and March showing higher year-on-year growth
than January. All product categories recorded higher sales, except Sporting Goods (-2.3%). The best
performing categories were Health & Beauty (+19%) and Services (+18%). Fashion, the largest segment,
saw sales increase by 9%.
The average basket size continued to grow strongly (by almost 9% between Q1 2024 and Q1 2023) despite
inflation rates coming down from the high levels in 2023. This continues the post-pandemic trend of
consumers visiting less, but spending more each time they shop.
Leasing activity
In Q1 2024, the Group signed 272 new leases and lease renewals, for more than 72,700m2 (3.4% of total
GLA), of which 42% by gross lettable area (GLA) are new leases. International tenants accounted for 76%
of newly leased GLA.
Significant new leases signed in Q1 2024 include Half Price and Focus Hotel (Forum Gdansk, Poland),
Reserved (Arena Centar, Croatia and Arena Mall, Hungary), New Yorker (Alfa Centrum Bialystok,
Poland), Action! by Apollo (Galeria Mlyny, Slovakia), JD (Serdika Centre, Bulgaria), dm (Pitesti Retail
Park, Romania), Adidas (Mega Mall, Romania), Fressnapf (Mammut Shopping Centre, Hungary).
New units opened in Q1 2024 include Half Price (Galeria Wolomin, Poland), Reserved (Karolinka
Shopping Centre, Poland), Nike and JD Sports (Bonarka City Center, Poland), Hervis (Promenada
Craiova, Romania), Lego (Arena Centar, Croatia).
(1) As of 31 March 2024, the reported gearing ratio (LTV) excludes the €55.3 million right-of-use assets and
equal amount of lease liabilities, related to long-term land concessions associated to part of the Group's
properties located in Poland.
DEVELOPMENT UPDATE
Works at development projects under construction are on schedule and within budget. The extension of
Promenada Bucharest is scheduled to open in the fourth quarter (Q4) 2026. Lease terms were agreed for
52% of the additional GLA. The redevelopment of Bonarka City Center is 68% complete and will be
finalised in the second quarter (Q2) 2025. The 5,900m2 extension of Ploiesti Shopping City is due to open
in Q4 2024, with lease terms agreed for 79% of the additional GLA. Works on the refurbishment of Arena
Mall Budapest started in April 2024 and will be completed in Q2 2028. Lease terms were agreed for 62%
of the refurbished GLA.
Permitting is ongoing for Promenada Mall Plovdiv, a 60,500m2 GLA retail project in Bulgaria's second
largest city. Construction is expected to start in Q4 2024, with an estimated completion in Q4 2026.
Preliminary retailer interest is very strong.
The first phase of the Company's green energy project, which involves installing photovoltaic panels
across 27 locations in Romania, is almost complete. The investment to date is €34 million with total
installed power capacity of 38 MW. Procurement for the second stage of this project, involving a roll out
of the programme across other markets, has started.
NEPI Rockcastle's development pipeline under construction, or permitting, totals over €650 million, of
which €206 million had been spent by 31 March 2024.
CASH MANAGEMENT AND DEBT
As of 31 March 2024, NEPI Rockcastle has a very strong liquidity profile, with close to €1.4 billion in cash
and undrawn committed credit facilities (adjusted for the repayment of the upcoming maturing bond in
November 2024, the liquidity amounts to over €900 million). The Group's gearing ratio (interest bearing
debt less cash, divided by investment property) was 31.5%, comfortably below the 35% strategic threshold.
The green financing agreement with the IFC, contracted in December 2023 and supplemented in April
2024, is structured as a senior unsecured green loan with sustainability-linked features focused on the
reduction of greenhouse gas emissions and boosting energy efficiency across our property portfolio. The
facility has competitive pricing linked to the Euribor rate and is set to mature in January 2029. Its first
tranche was disbursed in February 2024, and the increase signed in April 2024 has a withdrawal
availability period of three months.
Eliza Predoiu, NEPI Rockcastle's Chief Financial Officer, said: "Sustainability is a strategic
priority for NEPI Rockcastle – it lies at the core of our operations and the way in which we finance our
business. The unsecured green loan arranged by the IFC reinforces our commitment to strengthening our
operations and development pipeline in a sustainable way, with higher energy efficiency and lower
emission factors. The support of the IFC together with leading international commercial banks and
investment managers is a powerful statement of trust in our business strategy, solid financial standing
and proven track record of delivering industry-leading performance in the CEE retail market."
As of 31 March 2024, ratios for unsecured loans and bonds showed ample headroom compared to
covenants, as follows:
- Solvency Ratio: 0.4 actual compared to maximum 0.6 requirement,
- Consolidated Coverage Ratio: 5.9 actual compared to minimum 2 requirement,
- Unencumbered consolidated total assets/unsecured consolidated total debt: 250% actual
compared to minimum 150% requirement.
The Q1 2024 average cost of debt was 2.87% (corresponding to 2.64%, adjusted for the finance income
resulting from the placement of the excess liquidity from the disbursed tranche of the IFC loan). As of
March 2024, the balance exposed to variable interest rate corresponds to the disbursed tranche of the IFC
loan and represents 13% of the total outstanding debt. Management continually monitor the interest rate
market for opportunities to hedge our variable interest rate exposure.
CHANGE TO THE BOARD OF DIRECTORS, APPOINTMENT OF AN INDEPENDENT NON-EXECUTIVE DIRECTOR
Ms. Jeanine Holscher was appointed as an Independent non-Executive Director of NEPI Rockcastle at the
next Annual General Meeting of Shareholders held on 14 May 2024. Ms. Holscher possesses over 25 years
of leadership experience spanning retail, travel, services industries, and international strategy consulting.
Ms. Holscher brings a wealth of leadership experience, having served in various high-profile roles within
the retail and service sectors.
OUTLOOK
The Board reaffirms its guidance released in February 2024 that distributable earnings per share for the
year will be approximately 4% higher than 2023 distributable earnings per share, with no change in the
Company's current 90% dividend payout ratio.
This guidance does not consider the impact of greater political instability in the region or major
macroeconomic disruption and assumes current trading trends continue. This guidance can be modified,
or withdrawn, in the future if material changes unfold. This guidance has not been reviewed or reported
on by NEPI Rockcastle's auditors and is the responsibility of the Board of Directors.
By order of the Board of Directors
Rudiger Dany
Chief Executive Officer (CEO)
Eliza Predoiu
Chief Financial Officer (CFO)
15 May 2024
For further information please contact:
NEPI Rockcastle N.V.
Rudiger Dany/Eliza Predoiu +31 202 37 47 70
JSE sponsor
Java Capital +27 11 722 3050
Euronext Listing Agent
ING Bank +31 20 563 6685
Media Relations mediarelations@nepirockcastle.com
Date: 15-05-2024 10:32:00
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